The author is indebted to two anonymous referees for the many substantive improvements they suggested and to Professor Paul Gregory and Judith Payne, who provided many detailed recommendations. All remaining shortcomings are the author's responsibility.
Fiscal Decentralisation and Economic Growth in High-Income OECD Countries
Version of Record online: 2 FEB 2005
Volume 24, Issue 3, pages 237–274, September 2003
How to Cite
Thiessen, U. (2003), Fiscal Decentralisation and Economic Growth in High-Income OECD Countries. Fiscal Studies, 24: 237–274. doi: 10.1111/j.1475-5890.2003.tb00084.x
- Issue online: 2 FEB 2005
- Version of Record online: 2 FEB 2005
- economic growth
Among the majority of high–income OECD countries, the degree of fiscal decentralisation has converged over the last 30 years towards an intermediate level. The theoretical arguments for and against fiscal decentralisation point to explanations for this tendency, because both extreme decentralisation and extreme centralisation are associated with disadvantages for economic growth. Hence, the observed trend of convergence would be growth–promoting. The paper analyses the long–run empirical relationship between per capita economic growth, capital formation and total factor productivity growth, and fiscal decentralisation for the high–income OECD countries. The evidence supports the view that the relationship is positive when fiscal decentralisation is increasing from low levels, but then reaches a peak and turns negative. A policy implication is that policy–makers in several countries with relatively low degrees of fiscal decentralisation could possibly mobilise growth reserves by increasing it.